New IPS Proposal Would Scrap Most of the Deficit

Without trimming the safety net, an Institute for Policy Studies framework would shrink the federal budget deficit by $881 billion per year while making the United States more equitable, green, and secure.

December 5, 2012.

Without trimming the safety net, an Institute for Policy Studies framework would shrink the federal budget deficit by $881 billion per year while making the United States more equitable, green, and secure.

This proposal wouldn’t raise the retirement age or rip a new hole in our safety net. Instead, it calls for fairly taxing the rich and Wall Street, taxing polluters and right-sizing the Pentagon.

“We’re not broke. We can reduce the deficit and create jobs while making the country more equitable, green, and secure — without hurting the poor and elderly,” said John Cavanagh, director of the Institute for Policy Studies. “We can take care of our problems today while building a better world for our children and grandchildren.”

The report draws on the Institute’s strong expertise in the areas of fair taxation, military spending, social services policy, and sustainable energy. It includes 20 creative ideas, such as introducing a Wall Street tax on financial transactions, stopping tax haven abuse, closing tax loopholes for wealthy Americans, ending military operations in Afghanistan, shutting down obsolete weapons programs, taxing carbon emissions, and doing away with subsidies for coal, oil, and gas companies.

“Instead of freaking out about a theoretical ‘cliff,’ we should do something about the real challenges that could wreck our future,” said Emily Schwartz Greco, editor of the report as well as the OtherWords editorial service. “We’re not a poor country. We’re just suffering from a poverty of imagination and courage. There are sensible ways to achieve a more sustainable budget without hurting the most vulnerable among us.”

SUMMARY The proposal would cut the federal budget deficit by $881 billion a year while making the United States more equitable, green, and secure. Three broad proposals would:

1. Make the tax code fairer to advance a more equitable society: Levying new taxes on Wall Street and corporations while restoring rates on rich individuals to historic norms could, if rigorously enforced, raise more than $458 billion a year and reduce reckless financial speculation. Between 1935 and the late 1970s, progressive tax rates and investments in infrastructure, education, and housing expanded the middle class and served as a foundation for decades of broadly shared prosperity.

2. Right-size the Pentagon to make the United States and the world more secure: The Pentagon consumes more than half of U.S. federal discretionary spending. We have identified a total of $198 billion in yearly military budget cuts that can be made without hurting our national security largely by ending the war in Afghanistan, scaling back the sprawling network of overseas U.S. military bases, and scrapping obsolete and wasteful military programs.

3. Tax pollution, cut subsidies for dirty energy, and improve our land-use policies to create a cleaner environment and greener economy: If all polluters had to pay the full cost of environmentally harmful practices, they would be more motivated to embrace greener technology and reduce our dependence on unsustainable practices. The Obama administration has promised to eliminate fossil fuel subsidies and yet U.S. taxpayers are still spending tens of billions of dollars per year on these handouts. We recommend ending this corporate welfare and introducing new taxes on pollution that could generate an estimated $225 billion per year in revenue.

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